Bessent Tells Fed Not to Over-Hike Into Energy Supply Shock as Goolsbee Warns Inflation Is Broad-Based and Going Wrong Way

Treasury Secretary Scott Bessent and Chicago Fed President Austan Goolsbee delivered sharply contrasting inflation assessments on November 13, putting the administration and the central bank publicly at odds over the right policy response to rising prices. Bessent argued that the Fed should recognize current inflation as an energy supply shock driven by Iran, that core inflation remains under control, and that hiking too aggressively into a shock that is already coming down would be chasing a noisy number. He said the U.S. will get to the other side of the Iran-driven energy disruption, and urged the Fed to look forward rather than react to headline figures.

Goolsbee pushed back forcefully, saying on CNBC that inflation is broad-based and going the wrong way, and has spread into categories with no connection to energy. He said inflation is proving far more persistent than expected back when it appeared to be purely a supply-shock story, and that services inflation and rising healthcare costs do not look likely to reverse quickly. He singled out the AI data-center buildout as a source of price pressure, warned that even a rapid drop in oil prices would not fully relieve consumers because refining capacity constraints will keep diesel and jet fuel elevated, and said the labor market is stable and possibly tightening. Goolsbee acknowledged the Fed "definitely has work to do" to maintain its credibility, confirmed the central bank is not on track to hit its 2 percent target, and said worsening data would make the Fed more aggressive.

The backdrop is a bond market already under severe stress. The 10-year Treasury yield spiked 26 basis points over four days to 5.11 percent, one of the largest such moves in four years, as October payrolls of 165,000 and an annualized CPI pace extrapolating to roughly 4 percent underscored the inflation problem. Bank of America moved the same morning to forecast rate hikes at each of the Fed's next three meetings, saying the central bank looks further behind the curve. Prediction markets put the probability of a December hike at 91 percent. MNI separately reported the Fed appears on course to raise rates again in December and debate a third move in early 2027 before reassessing.

Bessent also addressed separate topics during his remarks, saying Treasury had pushed for months to add Chinese chip buyer Megaspeed to the export control entity list while Commerce did not act, questioning whether Nvidia made a robust effort to prevent sales to pass-through shell companies, and vowing to continue squeezing Iran with sanctions on its banks. He expressed optimism about reaching trade deals with Canada and Mexico, and said the U.S. recently saw four of the strongest bond auctions in 20 years.